As you can see, the indicator is in a consolidation phase when the stock is in a range-bound market. When this happens, it is relatively difficult to trade it because the distance between the levels is narrow. In all this, it is always recommended that you combine the oscillator with other trend-following indicators. The most popular trend-following indicators are moving average and the Bollinger Bands. Therefore, as you can see, the Gator oscillator is based on the simple moving average.
The former doesn’t directly identify the trend’s direction but only captures the mood. It helps the traders make sense of market phases by dividing moves into the sleeping, awakening, eating, and weakening phases. This happens when there are bullish or green bars on the two sides of the indicator. When this happens, the difference between the two sets of the moving average tends to grow as well.
Can the Gator Oscillator be used in all markets?
The bars can be green and red, depending on the nature of the trend. If the price action and the formation of bars (bar size even) move in different directions, you might be looking at trading divergence. Despite the formation of red and green histogram bars, the price of BTC corrected instead of rising, as the bars were smallish and not aligned with the price action. These phases, when viewed in combination with the Alligator Indicator’s moving averages and the price action, help you with decision-making and even risk management. The idea is to look for the histogram analysis patterns to turn green and red from all red before you can consider entering a long position.
How to customize the Gator Oscillator settings?
In a trending market, you need to enter when the green bars are rising and the Alligator lines are below the price; it indicates a strong uptrend. Additionally, it’s important to note that the Gator Oscillator indicator works best across a longer timeframe. This means it works best with more established/mature cryptocurrencies with discernable historical data to analyze. Notice how the weekly BTC chart reveals a more accurate formation of the Gator Oscillator. The ellipse highlighting the oscillator’s specific zone reveals the eating zone, after which the sated zone arrives quickly with sizeable green and red bars.
- When they fan out, the Alligator is awake and ready to eat profits in the market.
- The Gator Oscillator is considered as an auxiliary tool and is not usually used on its own.
- In this case, the teeth are the blue line and smoothed as 9-period instead of 8-period of showcase mid-term trends instead of short-term.
- On the other hand, when the market is consolidating, the Gator histogram bars will start contracting, warning you to get out of the market.
- Therefore, as you can see, the Gator oscillator is based on the simple moving average.
- For the Gator oscillator strategy, it’s better to apply the Alligator indicator.
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- A red bar means that the bar is smaller than the preceding one, implying a narrowing of the space between the moving averages.
- For instance, if you are a day trader, you will likely be trading on an intraday timeframe, such as the hourly, 30-minute, 15-minute, or 5-minute timeframe.
- This means it works best with more established/mature cryptocurrencies with discernable historical data to analyze.
- As mentioned earlier, the Gator Oscillator comprises dual histograms comprising upper and lower bars.
Bill Williams developed the gator oscillator for his trading strategy based on the principles of the chaos theory. It can give a visually more pleasing interpretation of the gator oscillator alligator indicator, which it is usually used in conjunction with it. Bill Williams also created the accelerator oscillator and awesome oscillator which help to form his trading strategy template that is readily available in the popular MetaTrader platforms. Use histogram analysis, keeping the middle or zero lines as a reference. If the bars on both sides of the middle line are red, the price action or trend is expected to be sleeping. Trading with the Gator Oscillator requires you to choose a longer time frame, say weekly.
How to use the Gator Oscillator indicator?
In this phase, bars have different colors above and below the zero line. It marks slowing the market, and you can exit your positions here. On the other hand, if the gator bars are below the zero line and the Alligator indicator green line (teeth) is below the price, it signifies an uptrend.
When paired with the price action, this is one of the trading indicators that uses short-term moving averages for technical analysis. Alligator strategy works well in crypto market analysis as you capture the asset’s volatility without relying on multiple trading indicators. As with the majority of trading tools used for technical analysis that are based on moving averages, the gator oscillator indicator can be lagging behind actual market movements. If using a trend trading strategy, a trader would usually search for market entry points where the gator oscillator columns are increasing in size.
Graphically, the gator oscillator is displayed as two interconnected histograms whose columns are colored green if the previous column is larger than the current and red if less. The Gator Oscillator uses the convergence and divergence of the three balance lines from the Alligator Indicator to help you identify new trends. It also aids interpretation of how such trends are progressing, and when they might be coming to an end. Ideally, most traders open a buy position when the indicator opens and then exit when the trend exhaustion phase ends. One can also take profit or exit their trades when the indicator moves in a sated position.
In 2024, the price of BTC seems to be trading in the sleeping zone, slowly transitioning to the awakening zone. Yet, it is noticeable that the bars in the awakening zone aren’t as big as the ones in the last sated phase. This shows that BTC might keep moving in a range for now, making short-term highs and lows only from the trading perspective. Not all color “signals” on the Gator Oscillator’s histogram have a reliable, and most importantly, unambiguous interpretation. During the flat periods indicator constantly changes its signals − in such conditions an inexperienced trader can perform a series of the unprofitable trades. The four phases of the oscillator tell you when to enter or exit the trade.
Bill Williams developed all his indicators on the different phases of Alligators. Developed by Bill Williams, the Gator oscillator tells about the trend’s direction in multiple phases. It is a supplement to the Williams Alligator indicator and is often alongside the indicator. This guide dives into the Gator Oscillator, examining its practical applications, calculation method, and analytical benefits.
The upper histogram is the absolute difference between blue and red lines of the Alligator; the lower histogram represents the difference between the values of the red and green lines. According to the author the main goal of the indicator is to simplify the overall strategy’s performance and make its signals more understandable. The Gator Oscillator was designed in a bid to help traders identify the convergence and divergence of the balance lines. As a result, one can see when a market is trending or range-bound.
Derived from the Alligator indicator, the Gator Oscillator offers a different view of the behavior of the Alligator indicator. As with most oscillators, the Gator Oscillator is plotted in an indicator window below the price chart. The Alligator pattern in crypto trading corresponds to the multiple behavioral phases of the alligator — sleeping, waking, eating, and sating — to analyze the inclination of traders. Trading oscillators like the Gator Oscillator are formed using the alligator pattern and are useful for helping traders locate the best times to enter and exit crypto trading positions. Based on the historical analysis, we expect the price action to be muted for a while before BTC enters the sleeping zone.
Although the Gator Oscillator works for reversal strategies, it’s better to apply the indicator for trend continuation strategies. Then, you set up the indicator with the best-performing settings from your backtesting. Also, you should periodically evaluate the performance of the strategy to know when you need to tweak the settings.
Note that these phases were between January and February 2021, and BTC embarked on several such journeys to reach a peak of almost $69,000 by the end of the year. If you are looking to trade forex online, you will need an account with a forex broker. If you are looking for some inspiration, please feel free to browse my best forex brokers. IC Markets are my top choice as I find they have tight spreads, low commission fees, quick execution speeds and excellent customer support. Not always both indicators work synchronously, as a rule, Gator Oscillator is late.